Business Daily from THE HINDU group of publications
Tuesday, Jun 23, 2009
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Business Daily from THE HINDU group of publications Tuesday, Jun 23, 2009 ePaper | Mobile/PDA Version | Audio | Blogs |
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Derivatives Markets Markets - Foreign Institutional Investors
Lokeshwarri S.K. BL Research Bureau Foreign institutional investor (FII) activity on the bourses has turned tepid since the second week of June. They have not only been net sellers in cash segment, but have also significantly reduced their exposure in derivative segment. Indian equities have been in a corrective mode since June 12 and this has dragged Sensex down 8 per cent from the recent peak of 15600. It is no secret that FIIs have been the perpetrators of this decline; they have sold close to Rs 1,694 crore in the cash segment over the past week. A similar trend is seen in FII action on the derivative segment of the National Stock Exchange as well. Total open interest (futures and options contracts that have not been squared-off at the end of a trading session) on NSE on June 19 – at Rs 90,400 crore – was only 3 per cent lower than the total contracts outstanding on May 19. But the open interest of the contracts traded by FIIs declined 11 per cent to Rs 31,961 crore in the same period. The inference that can be drawn from these figures is that domestic traders have increased their exposure to the derivative segment, thus keeping the overall open positions stable. The reduction in FII open interest is largely accounted for by the reduction in the number of index option contracts that they have outstanding. While they held index options worth Rs 18,500 crore a month ago, this number has whittled down to Rs 13,250 crore by June 19. Index option positions that are primarily portfolio hedges could have reduced as the confidence of FIIs in the sustainability of the current rally increased. Considering the break up of open interest for the entire market, it is obvious that while index call options (bullish positions) have remained steady over last month, there has been a drop in index put (bearish positions) options. Reduction in index putsAs many short-sellers incurred heavy losses when the Sensex jumped 17 per cent in two sessions following the Lok Sabha election results, they would have been wary about initiating fresh shorts given the relentless rally witnessed till June 12. This could account for a decline in short positions, while longs remain stable. More Stories on : Derivatives Markets | Foreign Institutional Investors | Stock Markets
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